Rest In Peace, Greece

According to the Wall Street Journal, Greece's creditors are expected to release another tranche of money to the debt-ridden country, after the country announced additional taxes to cover a €2 billion shortfall in revenues. You know what? It does not matter. Greece is going to fail soon anyway. We have been talking about this for months. Greece is expected to get the funds from a group known as the "troika"-the IMF, European Union and European Central Bank, but according to two officials from IMF, the December payment is going to be more difficult to get then the recent €8 billion that it is expected to get. The inevitability of a default is just being pushed back from September to December. There is no way that Greece can get its budget targets in place and actually have them succeed. Let's face it. Greece is going to default, most likely in December unless a Christmas miracle happens. Greece did not default over the weekend, as many predicted, but it is simply a matter of time. Prime George Minister George Papandreou continued to deny over the weekend that Greece would default, but we saw these same denials with Bear Stearns and Lehman Bros. Look where those two investment banks are now. Despite claims that Papandreou and the rest of his government would cuts spending, raise taxes and sell government assets, it has not worked the way the Greek government has wanted. Unemployment in the country continues to soar, GDP is falling at depression levels, and there are citizen protests consistently. Many of them have turned violent, evenly deadly. With the €8 billion seemingly on its way, Greece will be able to pay its bills, at least for the next few weeks. Even so, Greece has never lived up to the promises it made when it received the first bailout, and the pressure continues to mount daily. Just look at the yield on Greek 1 year debt. "I think this is Greece's last chance," the first official told the newswires in comments that were captured by the Journal. "If promised reforms are not implemented by the next review in December, things for Greece will become much more difficult with the next loan tranche far from certain. The Greek government knows that emergency measures like new taxes can only get them to a point before the population reacts in a dramatic way. They need sustainable measures with a smaller public sector where everyone is paying his fair amount of taxes. Only then the country can return to a sustainable path." We have seen the Euro drop from over $1.40 to the U.S. dollar to around $1.36 as of the time of this article. When (not if) Greece defaults, many suspect it may go all the way to $1.30 to the U.S. dollar, perhaps even lower. As one of the officials said, Italy and Spain's bond market would get rocked, and there is no telling how the other PIIGS would react, but many believe they may go the way of Greece. The market is forcing the European Union's hands on Eurobonds and the increase in the Euro Financial Stability Fund. If Angela Merkel wants to see the Euro live on, this will happen. If not, then Greece, and perhaps the rest of Europe, dies with it. ACTION ITEMS:

Bullish:
Traders who believe that Greece gets saved might want to consider the following trades:

• While this appears highly unlikely, there is always a chance. If this happens, traders may want to look at buying CurrencyShares Euro Trust FXE on the bet of a higher Euro.

Bearish:
Traders who believe that Greece does default may consider alternate positions:

• Traders might want to take a look at the ProShares UltraShort Euro EUO or the Market Vectors Double Short Euro DRR if they think that the euro will sink lower after Greece finally defaults.

• The CurrencyShares Swiss Franc FXF, CurrencyShares Japanese Yen FXY or SPDR Gold Shares GLD ETFs should also benefit.
  
  

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